Despite multiple years of accelerating premium increases and a third-straight year of double-digit premium growth, employers made only modest changes to their health plans in 2003, demonstrating perhaps their reluctance to significantly change the benefits and arrangements that most workers and their families have come to rely upon.
Although worker contributions and cost-sharing continue to grow, the changes in 2003 were relatively modest given the continued weak job market and magnitude of premium increases. Although employers made relatively few changes in their health benefit plans, this should not be taken as a sign that they are satisfied with the performance of the current health care system. Rather, the lack of change may well reflect their ambivalence about the options that they have. In the early 1990s, when costs were rising very rapidly, employers turned quickly to managed care, which was portrayed as an alternative that offered more and better benefits at lower costs. In a few short years, however, workers were demanding greater choice and costs began to rise again3. During this current period of rising premiums, there are few easy or attractive cost-containment choices. Returning to managed care means that employers have to reintroduce management techniques that were extremely unpopular with the public. Consumer-driven health care approaches are unproven and require employers to substantially increase out-of-pocket costs for some of their employees, a move that may be even less popular than managed care.
However, employers do not have strong confidence that current market strategies can reduce premium growth. This may explain why we are not seeing more significant changes in the marketplace. The most commonly identified approach for cost containment by employers was disease management, but fewer than one-quarter (22%) of employers viewed it as very effective in addressing cost increases. Other approaches investigated were: consumer driven health plans (identified as very effective by 14 percent of employers), higher cost sharing (10 percent of employers), and tighter managed care networks (6 percent of employers). While employers see some benefit in all of these approaches (most employers said each approach would at least be somewhat effective), no approach stands out from the others. This suggests that employers have not identified a future direction for their benefit plans that they believe would relieve current cost pressures.
This lack of consensus among employers makes it difficult to predict what the future will hold. When we ask employers what they are likely to do in 2004, their responses were similar to last years'. Significant percentages (but less than a third) reported that they will increase contributions and cost-sharing, but very few say that they will reduce eligibility or drop coverage. These responses suggest that we may see another year where costs and cost-sharing drifts upwards, without dramatic changes in availability of coverage in the market. There are few signs of employer interest in alternative approaches to health benefit design, with 17% percent of jumbo firms (5,000 or more workers) now offering a high deductible plan, and another 17% of such firms saying they are highly likely to add such a plan next year. These very large firms, which employ of all covered workers, have historically been the catalyst of change in the market. Their interest and any success in reducing premium growth they experience may lead to these plans becoming more widespread.
[3] Altman, D. and Levitt, L. "The Sad Story of Cost Containment Told in One Chart", Health Affairs, Web Exclusive, January 23, 2002.
